Simon Magner, Managing Director at Iridium, talks us through his thoughts on the Dext report: The Future Needs of South Africa’s SMBs.
The bigger picture
Accountants must hold business owners accountable to what they are trying to do. Sometimes entrepreneurs can be sidetracked by their passion for the business and they forget the business logic. Accountants now have a responsibility to remind them of the bigger picture and look beyond what was previously expected of us.
I like to interrogate the fundamentals of a business: what’s the point of this? Why is it relevant? What problem are we solving, and why do we need to solve it? When we ask these questions, we give ourselves, and SMBs, a much clearer idea of where that particular business is going. We soon identify whether this is a long-term project designed to make money, or an extension of a hobby. Because, at the end of the day, if you’re not making more than you’re putting in, that’s a hobby.
When looking at the report, it’s clear that business owners are still focused on compliance-based accounting and many are reluctant to pay for services beyond this. That’s understandable: everyone is scared of the tax collector turning up at their door and taking away their money. It’s a fear factor, and it’s the reason a lot of accountants have jobs.
While we value compliance, we believe an all-in-one accounting service is what makes real difference. Compliance is like a grudge purchase. It’s a type of insurance. People don’t want to pay a lot for it, they just want to trust it’s happening. It may get clients through the door, but it’s a good service that keeps them inside. As accountants, we must aim to be more than compliance-based services that tick one small box. It’s our responsibility to remind clients of the bigger picture.
It’s also worth mentioning the disconnect between what clients pay accountants and the quality of service they receive. We find that if a client rings us up and tells us they don’t see the value in what we’re offering, that doesn’t mean they’re not happy with how much they are paying – it means we’ve done something wrong. This is where, I believe, firms need to reassess. Value doesn’t mean a better price, and expensive is a word that sometimes causes confusion. When a client says that word to an accountant, a lot of firms see that as: ‘we need to be cheaper.’ What they’re actually asking is that you provide a better service. For this reason, we don’t try to be the most cost-effective accounting firm, because we know that’s not what people want.
No one goes to the cheapest doctor in town or says ‘I’m in’ to a dentist offering a discount. These are essential practices. And so is accounting. Instead of adjusting our price tag to suit clients, we must refine our value. It’s then up to us to convince them that the value they’re getting is worth it.
As the report shows, there’s also a lot to be said about cash flow. While it is currently the biggest concern for SMBs, how accountants integrate it into their service is the real question. I believe that cash flow is a by-product of good accounting and planning; there’s no need to offer it as a separate service line.
From our experience, we find that micromanaging cash flow can cause more harm than good. If you go from week to week, always watching what you’re paying, you spend more time worrying about your cash flow than you do about your business. We only ask our business owners to invoice their clients – the rest we handle.
For SMBs, separating cash flow can be useful to help them keep on top of things. We, however, advise on a month-to-month approach. As soon as you start micro-checking, you lose sight of the more important things. We find that most business owners struggle when they have too much on their plate. That’s why when we offer an integrated service that covers all areas, we give business owners far less to worry about. In my eyes, that’s accounting at its best.
About Simon Magner
Simon Magner is the Managing Director of Iridium – the accounting, automation and advisory firm shaped by innovation and driven by customer success. Passionate about helping businesses grow, Simon is a small business specialist who wants to build a better South Africa. Iridium is a completely cloud-based firm, with Simon very much the driving force behind their ambitious goal: to disrupt the industry and, through technology, take businesses to the next level.
Do you need help understanding finances a bit better? Check out our guide on accounting for small business!